Full Year 2021 British American Tobacco PLC Earnings Call
[music].
Okay.
Okay.
<unk>.
Hum.
Yes.
Hmm.
Hum.
[music].
Hum.
Hum.
Speaker 1: Good morning everyone. I'm Jack Boles, the Chief Executive of BH.
[music] with morning, everyone I'm, Jack Bowles, Chief Executive of beauty and I'm here with the molecule they'll go finance and transformation.
Speaker 2: And I'm here with Tadeu Maroko, the group finance and transformation DAI.
Alright, though.
Speaker 2: We are very happy to be with you this morning to present our 2021 results.
We are very happy to be with you. This morning to present, they'll 2021 the results.
Speaker 2: I hope everyone listening this morning and your families and friends are well.
I hope everyone listening this morning, and your families and friends all win.
It's one thing to what you want and we deliver the people through the year, a key milestone towards our 'twenty 'twenty five targets and okay acceleration any doubts ones for you mentioned, you'll need to build a better tomorrow.
Speaker 2: In 2021, we delivered the pivotal year, a key milestone towards our 2025 targets and a clear acceleration in our transformation journey to build a better tomorrow.
Speaker 2: This morning I will share the key highlights of our progress and then Tadeo will provide more details on our performance and outcomes.
This morning, I wouldn't say are the key highlights of our progress and then we'll provide more details on our performance and outlook.
Speaker 2: A year ago we said that 2021 would be a pivotal year and we were at a critical turning point in VAT's transformation journey. We committed to accelerating new category revenue growth, reducing new category losses for the first time, and deleveraging to around three times net debt to EBITDA. And I'm delighted to say that we have delivered on all three areas.
A year ago, we said, though 2021 would be if people at the year end.
And we were at a critical turning point in these transformation journey.
We're committed to accelerating new category revenue growth rate.
We're seeing new category losses for the first time and deleveraging to around three times net debt to EBITDA.
And I'm delighted to say that we have delivered on all three areas.
Speaker 2: We accelerated constant currency new categories revenue growth to over 50%. We reduced new category losses for the first time, which check our 100 million improvement in profitability.
We accelerated constant currency in your categories revenue rose to over 50%.
Or would you assume you'll get the OE losses for the first time, we check 100 million improvement in profitability.
Speaker 2: And with continued strong cash conversion, we reduced leverage to below three times.
And we continue with strong cash conversion, we reduce leverage to below three times.
Speaker 2: As we said, this has given us the financial flexibility to be more active on our capital allocation.
As we said that he's got this has given us the financial flexibility to be more active on the capital allocation.
Speaker 2: to deliver sustainable long-term value for shareholders.
They leave our sustainable long term value for shareholders.
As a first step.
Speaker 2: As a first step in our new capital allocation framework, whilst maintaining a growing dividend, we have announced a 2 billion share buyback for 2022. That's all, we'll talk more in the next video.
On your capital allocation framework, whilst maintaining or growing dividend, we have announced a 2 billion share buyback for 2022 .
Daniel will talk more about this later.
Speaker 2: With strong progress in new categories, we successfully accelerated our transformation in 2021.
With strong progress in your categories, where he successfully accelerated our transformation in 2021.
Speaker 2: and we are well on track to deliver on our 2025 target.
And we are well on track to deliver on our 'twenty 'twenty five targets.
Speaker 2: Our purpose to reduce the health impact of our business is central to our strategy.
All purpose, we'd use the husband in fact of our business is central to our strategy.
Speaker 2: and we are actively encouraging smokers to switch from cigarettes to our reduced risk new category product.
We're actively encouraging smokers to switch from cigarettes to all reduce waste and you'll get the worry of products.
They must strengthening this where they live or the recall the increase in consumers of Noncombustible products in 2020 one.
Speaker 2: Demonstrating this, we delivered a record increase in consumers of non-combustible products in 2021.
Speaker 2: We grew this consumer base by 4.8 million to reach 18.3 million with strong growth across all three new categories.
We go with this consumer base by $4 8 million to reach $18 3 million with strong growth across all three new categories.
Speaker 2: This shows the power of our multi-category strategy to encourage the largest numbers of smokers to switch to our broad range of reduced risk products.
And it shows the power of our multi category strategy to Anchorage, the largest numbers of smokers to switch to our broad range of reduced risk products.
With the strong momentum, we're confident in achieving our target of 50 million consumers of Noncombustible products by 'twenty itself.
Speaker 2: With this strong momentum, we are confident in achieving our target of 50 million consumers of non-combustible products by 2030.
Speaker 2: Over the last three years, we have built three powerful new category global drive brands.
Over the last three years, we have built three powerful and you'll get there great Global drive brands.
Speaker 2: views is the number one global vaping brand with a value share of 34%
He was a he was the number one global invade thing, Brian with the value of shelf starting 4%.
Speaker 2: I am particularly pleased that in the US, views delivered strong revenue and share growth and in the second half of 2021 became profitable at the category contribution level for the first time.
I am, particularly pleased though that in the U S. He was thinking about strong revenue and share growth and in the second half of 2020 , one became profitable at the category contribution level for the first time.
Hello, I was achieved 18% volume share of G. H b in its key markets.
Speaker 2: GLOBE has achieved 18% volume share of THB in its key markets.
Speaker 2: growth has accelerated driven by the success of hyper which is delivering a step change in product satisfaction
That is accelerating driven by the success of Hypo, which is delivering a step change in product satisfaction.
Speaker 2: and a significant improvement in consumer conversion.
And a significant improvement in consumer conversion.
Speaker 2: With VILO, while we still have work to do in the US, our support of our international product further extended our volume share leadership in INNA.
With me, though why do we still have work to do in the U S. All support our international product saw the extended our volume share leadership in email.
Speaker 2: I am delighted with the performance of our new category brands, with each of them growing revenue by more than 40% in 2021.
I'm delighted with the performance of our new category brands with each of them growing revenue by more than 40% in 2020 one.
Speaker 2: This demonstrates the importance of a global multi-category strategy with strong brands, great products, in the right market.
These demonstrates the importance of our global multi category strategy with strong brands great products in the right markets.
Speaker 2: Our new category drive brands are supported by a clear ESG focus.
And you've got to go and drive brands all supported by clear ESG focus.
Speaker 2: which is both important to our consumers and is actively contributing to our group's sustainability targets.
Which is both are important to our consumers and he's actively contributing to our group sustainability targets.
For example.
We have already reduced plastic he now views packaging saving 250 tonnes globally.
Speaker 2: We have already reduced plastic in our used packaging, saving 250 tons globally.
Speaker 2: and we have comments, take back skins on new category devices and vapor cartridge.
And you have got months think back schemes or new category of devices and they broke outrageous.
This is fully in line with consumers evolving expectations of global brands and reflects all work to embed ESG across all business.
Speaker 2: This is fully in line with consumers evolving expectations of global brands and reflects our work to embed ESG across our business.
Turning now to the financials.
Speaker 2: We delivered robust results in 2021 while navigating the continuing challenges of COVID.
We delivered robust results in 2020 , one while navigating the continuing challenges of Covid.
Speaker 2: Our reported results reflect the translational currency headwind of over 7% on EPS.
Our reported results reflect the translation noted currency headwind of over 7% on the P. S bottler.
Speaker 2: partly offset by a reduction in adjusting items in 2021.
Partly offset by a reduction in adjusting items in 2020 one.
Speaker 2: To better understand the key drivers of our performance, we will focus on constant currency adjusted results, unless otherwise stated.
To better understand the key drivers of our performance, we will focus on constant currency adjusted results.
Yes, although wise state doesn't it.
Revenue was up nearly seven percentage points driven by excellent new category revenue growth and a strong performance from combustibles.
Speaker 2: Revenue was up nearly 7 percentage points driven by excellent new category revenue growth and a strong performance from combustibles.
E P S grow with that six 6%.
Speaker 2: which was at the top end of our mid single figure guidance range, having absorbed the net impact of a number of one-off factors.
Which was at the top end of our mid single figure guidance range I think.
So the net impact of a number of one off factors.
Speaker 2: I would like to take the opportunity to thank all our people and partners for their continued focus and commitment in delivering this performance.
I would like to take the opportunity to thank all of our people and partners for their continued focus and commitment in delivering this performance.
Through these difficult Covid period.
I think they live although now people tell you well know entering the next phase of our jewelry Foster transformation.
Speaker 2: Having delivered on our pivotal year, we are now entering the next phase of our journey, faster transformation.
This means first.
Speaker 2: This means first, new categories contribution to group revenue will continue to grow and is expected to more than double from the 2 billion to 5 billion by 2025.
Look I think always contribution to group revenue will continue to grow and is expected to more than double from the 2 billion two 5 billion by 2025.
Speaker 2: as we continue to encourage more smokers to switch to our reduced-risk products.
We continue to anchorage, more smokers to switch to a reduced risk products.
Second.
Speaker 2: As we leverage our increasing scale and reduce losses, new categories contribution to group profit growth is expected to accelerate. And third, with our more active and new capital allocation framework, we are committed to delivering enhanced long-term value for shareholders.
As we leverage our increasing scale and reduce losses, new categories contribution to group profit growth is expected to accelerate.
And so without more active and new capital allocation framework, we are committed to delivering enhanced long term value for shareholders.
With these foundations, we are building a better tomorrow, we're making strong progress towards our new category targets of 5 billion in revenue and profitability by 20 to 25.
Speaker 2: With these foundations, we are building a better tomorrow. We are making strong progress towards our new category targets of $5 billion in revenue and profitability by 2025. In addition, we see...
In addition.
We see significant opportunities beyond nicotine.
Speaker 2: We're with our investment in organic realm and through our corporate ventures, you need bit tomorrow ventures. We are building an ecosystem of capabilities.
Whereas with our investment in our getting Rama and through our corporate ventures, you need bed Tomorrow ventures, we're building an ecosystem of capabilities.
Speaker 2: as consumers increasingly seek products offering well-being and stimulation.
Consumers increasingly seek products offering wellbeing and stimulation.
Speaker 2: We will continue to deliver robust financial results and return to our medium-term outlook for.
We will continue to deliver robust financial results and the return to our medium term outlook fall.
Speaker 2: revenue growth of 3 to 5 percent and high single-figure EPS growth.
Revenue growth of 325%.
And high single figure EPS goals.
Speaker 2: With our continued focus on cash, we expect to generate around 40 billion of cumulative free cash flow over the next five years, representing more than half of our current market capitalization.
With our continued focus on cash we expect to generate around 40 billion of cumulative free cash flow over the next five years, representing more than half of our current market capitalization.
That they all will now provide more details on the strong momentum in our business.
Speaker 2: Tadeo will now provide more details on the strong momentum in our business. Tadeo.
Thank you.
Well, thank you Jackie.
I'm very pleased with our results in 'twenty to 'twenty, one with deliberate strong progress against all of our key financial focus areas.
Speaker 3: I'm very pleased with our results in 2021. We delivered strong progress against all of our key financial focus areas.
Speaker 3: We further increase investment in new categories by almost 500 million pounds, while at the same time reducing new category losses by close to 100 million.
We further increase in investment in new categories by almost 500 million pounds. Why are the same time, reducing new category losses by close to 100 million pulse.
Speaker 3: Quantum is fueling our transformation and in total we have delivered around 1.3 billion of savings and expect to deliver at least 1.5 billion of savings by the end of this year wasn't that great? Right.
Quantum is fueling our transformation and in total we have the liberty of around $1 3 billion of savings and expect to deliver at least $1 5 billion of savings by the end of D. C.
Speaker 3: Cash generation is a key focus for the group and we deliver another year of operating cash conversion in excess of 100%
Cash generation is a key focus for the group and we deliver another year of operating cash conversion in excess of 100 per cent.
Speaker 3: And as Jack has said, this has given us the financial flexibility to be more active in our capital allocation to deliver sustainable long-term value for shareholders.
And that as Jack has said this has giving us the financial flexibility should be more active in our capital location.
Deliver sustainable long term value for shareholders.
Speaker 3: As a first step, we have announced the dividend increase and the £2 billion share buyback for 2022.
As a first step we have announced the dividend increase and a 2 billion pounds share buyback for 'twenty to 'twenty two.
Turning now to the results.
Speaker 3: Revenue growth was strong at 6.9%, comfortably updating our guidance of above 5%
Revenue growth was strong at six 9% comfortably, beating our guidance of about 5%.
Speaker 3: The impact of excise chains in Australia and the sale of our business in Iran halfway through the year were partially offset by the impact of trade inventory movements in the U.S.
The impact of excise change the in Australia, and the sale of our business in Iran pathway through the year were partially offset by the impact of trade inventory movements in the U S.
Excellent new category revenue growth of 51% was driven by strong growth across all three categories.
Speaker 3: Excellent! New category revenue growth of 51% was driven by strong growth across all three categories.
Noncombustible contributed nearly half of our total group revenue growth at three percentage points.
Speaker 3: Non-combustibles contributed nearly half of our total group revenue growth at 3 percentage points, a significant step up from their 1% contribution in 2020.
A significant step up from that 1% contribution in 2020.
Speaker 3: Combustibles volume benefited from the performance of emoji markets, with the departure recovered from the impact of COVID in the prior year.
Combustible volume benefited from the performance of emerging markets with a partial recovery from the impact of Covid in the prior year.
Speaker 3: And with value share up 10 base points, we continue to drive value from combustion.
And with value share up 10 basis points, we continue to drive value from combustibles.
Speaker 3: Combustible price mix of 4.3% reflected strong pricing, partially offset by significant geographic mix from the emerging market record.
Combustible price mix up four 3% reflected strong pricing, partially offset by significant geographic mix from the emerging market recovery.
Speaker 3: The FX headwinds on Group and new category revenue were around 7% and 8% respectively.
The FX headwind some group a new category of revenue around seven and 8% respectively.
Speaker 3: We are delighted to announce VUE's global value share leadership in vapor in July 2020.
We are they like to try announced views global value share leadership in vapor in July 2021 .
We continue to build on this momentum in the second half with views achieving a fully a value share of 34% and our top five markets up 7.8 percentage points.
Speaker 3: We continue to build on this momentum in the second half, with views achieving a full year value share of 34% in our top 5 markets, up 7.8%!
Speaker 3: In addition, VUSE remains the device share leader across all our top 5 markets, a good indicator of future growth.
In addition views remains the device share leader across all of our top five markets are good indicator of future growth.
Speaker 3: With VIEW's growing brand strength, we raised prices in all key markets in 2021, driving second-half revenue growth above volume growth for the first time.
With views growing brand strength, we're raising prices in all key markets in 2021 driver.
Driving second half revenue growth of above volume growth for the first time.
Speaker 3: We also made good progress across all three key levers of profitability improvement.
We also made good progress across all three key levers of profitability improvements trade margins cost of goods and marketing spend effectiveness.
Speaker 3: Trade margins, cost of goods, and marketing spend effectiveness drive a strong improvement.
A strong improvement in paper profitability.
Speaker 3: In the U.S., views performed particularly well and has closed a 27% value share gap in just two years, and is now on the verge of leadership.
In the U S views performed particularly well and has closed at that point to seven percentage points value share gap in just two years and is now on the verge of leadership.
Speaker 3: Growth has been powered by continued brand equity improvement.
Growth has been powered by continued brand equity improvement.
Speaker 3: increased consumer relevant assortments including single and quad packs, which drove higher trial and conversion and now represent over 60% of volume.
And crazy, it's consumer relevant assortments, including single and Quad facts, which drove higher trial and conversion and now represent over 60% of volume.
Speaker 3: and the focus on excellence in our in-storage equipment.
And the focus on excellence in our in store execution.
In addition, the state by state execution planning has helped us to deliver hyper local views marketing expressions.
Speaker 3: In addition, state-by-state execution planning has helped us to deliver hyperlocal views of marketing expressions.
At the same time as Jack has said has redo we reduced the year on year losses, resulting views achieving profitability in the second half of 2021 .
Speaker 3: At the same time, as Jack has said, we reduce the year-on-year losses, resulting in views achieving profitability in the second half of 2021.
Speaker 3: This is a fantastic performance by our U.S. team and is an important milestone on our way to profitability to a group level by 2025.
This is a fantastic performance by our U S team and is an important milestone on our way to profitability to a group level by 20 to 25.
Speaker 3: In October , Vue Solo received the first of its kind PMTA authorization, confirming that the marketing of original Flavor Vue Solo products is appropriate for the protection of public health.
In October of your solid received the first of its kind P. M. T authorization confirmed that the marketing of original flavor. If you sell the product is appropriate for the protection of public health.
Speaker 3: This approval gives us further confidence in our other PMT applications, which share the same foundational science.
These approval gave us further confidence in our other PMT applications, which share the same foundational science.
Speaker 3: In addition to our success in VAPOR, we have also gained significant share in THP, powered by the continued success...
In addition to our success in vapour. We have also gained significant share in th be powered by the continued success of little hyper.
Speaker 3: In 2021, global share of the Japanese total nicotine market grew in every quarter to reach an average of 7.4% in Q4.
In 2021 gross chat all the Japanese total nicotine market growing every quarter to reach an average of 674% in Q4.
Speaker 3: In ENA, HYPER continues to drive strong share momentum, with GLOBE gaining volume share of Total Cigarette and THP in key markets.
And in the hyper continues to drive strong share momentum with the goal of gaining volume share of total cigarette and THP in key markets.
Speaker 3: In Russia, our THP growth has been enabled by the investments we made in the late 2020, partnered with outstanding brand equity building, which blends the best of glow with local Russian slaves.
Russia, our THP growth has been enabled by the investments we've made in the late <unk> 'twenty 'twenty partner with outstanding brand equity building, which blends the best up blow with local Russian flavor.
Speaker 3: Our share of the THP category in the T9 key markets was up 480 base points to 18% for 2021, with Hyper now accounting for over 70% of global volume.
Our share of the THP category in the teen nine key markets was up 480 basis points to 18% for 2021 with hyper now accounting for over 70% of loan volume.
Speaker 3: And in INA, low volume growth is outpacing category growth by a factor of more than five times.
And even though.
Global volume growth is outpacing category growth by a factor of more than five times driving our category broadens share up 930 basis points to 16, 6%.
Speaker 3: driving our category volume share up 930 base points to 16.6%
Speaker 3: As Hyper rapidly generates scale, we are reducing production and consumer acquisition costs supported by our marketing spend effectiveness digital tool.
That's how I've hyper rapidly generate scale, we are reducing production in consumer acquisition costs supported by our marketing spend effectiveness digital tools.
Speaker 3: In modern auto, global volume growth was up over 70%.
In modern oral global volume growth was up over 70%.
Speaker 3: In the U.S., while we recognize we have more to do, the category represents only around 1% of total nicotine industry revenue.
And the west while we recognize we have much to do.
The category represents only around 1% of total nicotine English revenue.
Due to the availability of establish alternatives, including vapor and traditional auto and significant discounting.
Speaker 3: due to the availability of established alternatives including vapor and traditional oil and significant Ai.
Speaker 3: In INA, we consolidated our clear leadership in both established oil markets in Scandinavia and more broadly across Europe , with further share gains.
In <unk>, we consolidated all our clear leadership in both established auto markets in Scandinavia.
And more broadly across Europe with further share gains.
Speaker 3: In our largest market, Sweden, Lyft Lab, our modern oil innovation hub, is a great example of where we have co-created with consumers to better meet their specific needs.
In our largest market Sweden.
Lifts the lab or more than all of our innovation hub is a great example of where we have co created with consumers.
Better meet their specific taste preference.
Speaker 3: The highly digitally focused activation has reached more than 12 million adult consumers.
They're highly digitally focused activation has reached more than 12 million all due to consumers.
In combustibles, we continue to drive value growth.
Speaker 3: Overall, we delivered combustibles revenue growth of 4%.
They're all with deliberate combustibles revenue grow 4%.
Speaker 3: with continuous strong cigarette pricing of 80 percent, partially offset by geographic mix.
With continued strong cigarettes, brighthaupt, 80%, partially offset by geographic mix.
Speaker 3: This was driven by the performance of emerging markets and their potential recovery from the impact of COVID in the prior year, particularly in Bangladesh, Pakistan and Vietnam. As a result,
This was driven by the performance of emerging markets and that potential recovery from the impact of Covid in the prior year.
Larry in Bangladesh, Pakistan and Vietnam.
As a result, combustible volume was flat.
Speaker 3: We are continuing to leverage our scale and combustibles to drive our transformation.
We are continuing to leverage our scale in combustibles to drive our transformation.
Speaker 3: Last year, one billion of our cigarette packs worldwide cared communication to encourage adult smokers to switch to our new category products. This year, we plan to double the...
Lastly, a 1 billion of our cigarette packs worldwide carrier communications to encourage other smokers to switch Chihuahua, new category of products.
This year, we plan to double these two to beat impacts.
Turning now to the regions and in the new category revenue grew by 18% with all three categories records in more than 40% growth.
Speaker 3: Turning now to the regions, in INA, new category revenue grew by 80%, with all three categories' records in more than 40% growth.
Speaker 3: Glow revenue more than doubled, driven by Glow hyper success, and THP is now the largest of our three categories in the region.
Hello revenue more than doubled driven by global hybrid success and th piece now the largest of our three categories in the region.
Hi investments associated with the rollout of hyper impacted regional profits.
Speaker 3: high investments associated with the rollout of hyper-impacted regional profits.
Speaker 3: In Vapor, revenue growth was ahead of volume growth in the year, driven by higher price-on-views.
In vapour revenue growth was I had the volume growth in the year driven by higher pricing on views.
Speaker 3: Combustible revenue grew 1% as volume decline was more than offset by price mix.
Combustible revenue grew 1% that volume decline was more than offset by price mix, which reflects the impact of excise increase in Russia.
Speaker 3: which reflect the impact of excise increase in Russia.
And I for me low revenue grew by 13% driven by volume and share gains with a strong acceleration in revenue in the second half.
Speaker 3: driven by volume share gains with a strong acceleration in revenue in the second half.
Speaker 3: On combustibles, higher volume and pricing was more than offset by geographic mix, the Australasian impact, and the sale of our business in Iran.
Buster, both higher volume and pricing was more than offset by geographic mix, the Australasia and impact and the sale of our business in Iran.
Speaker 3: In AMSA, continued strong growth of views in Canada and the recovery of vapour in South Africa following the sales ban in 2020 drove new category revenue up over 100%.
And the answer continues strong ROFO views in Canada, and the recovered paper in South Africa falling to say, what's been in 'twenty 'twenty drove new category revenue up over 100%.
Speaker 3: Combustible volume was flat, with revenue up 4% driven by strong price.
Combustible volume was flat with revenue up 4% driven by strong pricing.
Speaker 3: Cigarette and THP values shared declining 70 base points, driven by growth in the value segment due to the lower illicit trade in Canada and some downtrade in Mexico.
Cigarette and THP volume shed declining 70 basis points driven by growth in the value segments due to the lower illicit trade in Canada, and some down trading in Mexico.
And then you asked we continued our strong momentum new category revenue was up over 50% led by continued significant value share gains from views.
Speaker 3: In the U.S., we continue our strong momentum. New category revenue was up over 50 percent, led by continuous significant value-share gains from views.
Speaker 3: Revenue was up 9% driven by the excellent new category growth and the continued strong performance in combustion.
Revenue was up 9% driven by the excellent new category growth and the continued strong performance in combustibles.
Speaker 3: Combustible volume was down 5%, partially benefiting from trade inventory movements, which are expected to unwind in 2020.
Combustible volume was down 5%, partly benefiting from trade inventory movements, which are expected to unwind in 2022.
Speaker 3: These movements were mainly linked to the timing of price increases in 2021 and uncertainty about a potential excise in 2021.
These movements were mainly linked to the timing of price increases in 2021 and uncertainty about the potential excise increase.
Speaker 3: Our underlying volume decline adjusted for the number of selling dates and inventory movements was around 7.
Our underlying volume decline adjusted for the number of selling days in inventory movements was around 7%.
Well most of our revenue growth was eight 1% at constant currency driven by strong pricing with four b a T price increases due any day.
Speaker 3: Combustible revenue growth was 8.1% at constant current.
Speaker 3: driven by strong pricing, with four BAT price increases during the year.
Speaker 3: and also benefited from around 200 million pounds additional revenue due to the trade inventory.
And also benefited from around 200 million pounds of additional revenue due to the trade inventory movements.
Speaker 3: These results reflect the strength of our U.S. brand portfolio.
These results reflect the strength of our U S brand portfolio.
Valley Shang created by six basis points, driven by our premium brands, Newport and natural American spirits.
Speaker 3: Value sharing created by six base points driven by our premium brands Newport and Natural American Spirit.
Speaker 3: We relaunched the iconic brand LuxStrike in December 2020, successfully broadening our portfolio in the lower-priced segments and achieving around 1% national volume share in 2021.
We re launched the iconic brand luck striking December 'twenty 'twenty successfully broadening out both fall in the lower priced segments and achieving around 1% national volume share in 2021 .
Moving on to operating margin.
Speaker 3: Price mix and operational efficiencies contributed 40 base points to operating margin.
Mix and operational efficiencies contributed 40 basis points to operating margin.
Speaker 3: A strong operational improvement was partially offset by geographic mix and the net impact of an estimated 260 million negative property impacts in Australasia and the benefit of the US trade inventory.
Our strong operational improvement was partially offset by geographic mix and the net impact of an estimated 260 million negative profit impact in Australasia and the benefit of the U S trade inventory movements.
Speaker 3: The group absorbed a 1.7% transactional FX impact on profits, which was a headwind of 60 base points to my...
The group up solve it at 1.7% transactional FX impact on profits, which was a headwind of 60 basis points to margin.
We continue to increase new category investment with culture, an additional 500 million pounds investing in 2021, while at the same time, reducing new category of loss for the first time by nearly 10%.
Speaker 3: continue to increase new category investment with call to an additional 500 million pounds invested in 2021, while at the same time reducing new category loss for the first time by nearly 10%.
Speaker 3: As a result, the margin headwind from new categories has materially reduced.
As a result of the margin headwind from new categories has materially reduces.
This reduction in new category loss was driven by improved trade margins with a 31% improvement in vapor.
Speaker 3: Its reduction in new category losses was driven by improved trade margins with a 31% improvement in VAPOR.
Speaker 3: Overall, £220 million productivity savings through increased automation and reduced cost of goods sold.
Overall 220 million pounds productivity savings through increased automation and reducing the cost of goods sold and.
Speaker 3: and the significant improvement in our cost of consumer acquisition across all three brands, leveraging our marketing spend effectiveness.
And a significant improvement in our cost of consumer acquisition across all three brands, leveraging our marketing spend effectiveness tools.
Speaker 3: With views now profitable in the U.S., driven by the progress on all three levers, we have reached an important milestone.
With views now profitable in the U S driven by the progress on all three levers.
<unk> reached an important milestone.
Speaker 3: For the 2022 financial reporting period, we will disclose new category contributions to group profits.
Well the 'twenty to 'twenty, two financial reporting periods, we will disclose new category contribution to group profits to provide investors with increased visibility and clarity on our pathway to new category profitability by 20 to 25.
Speaker 3: provide investors with increased visibility and clarity on our pathway to new category profitability by 2025.
True quantum we are continuing to drive further simplification of the business.
Speaker 3: Through quantum, we are continuing to drive further simplification of the business.
Speaker 3: We have cut the number of business units by 40%.
We have cut the number of business units by 40%.
Speaker 3: reduced management layers with a 22% reduction in senior management headcount.
Do see the management layers with a 22% reduction in senior management head count.
Speaker 3: And we have redesigned our operating model to empower our people and increase our speed.
And we have redesigned our operating model to empower our people and increase always feature market.
As part of our continued focus on simplification and efficiency that you Wes will join our global tower operating model and SAP a lot the forum during 'twenty to 'twenty two.
Speaker 3: As part of our continued focus on simplification and efficiency, the US will join our global tower operating modern SAP platform during 2020.
Speaker 3: In total, through Quantum, we have delivered around $1.3 billion in savings.
In total through Quant, though we have delivered around $1 3 billion in savings.
Speaker 3: fueling our investment in our transformation and we now expect to deliver savings of at least $1.5 billion by the end of 2020.
Fueling our investment in our transformation and we now expect to deliver savings of at least one 5 billion by the end of 'twenty to 'twenty two.
Speaker 3: Turning now to EPS, we deliver constant current-adjusted dilute EPS growth of 6.6%.
Turning now to EPS, we delivered constant currency adjusted diluted EPS growth up six 6%.
Speaker 3: This was at the top end of our mid-single-figurative guidance.
This was at the top end of our mid single figure if guidance range, reflecting a robust operating performance. That's a neighborhood drops off the net impact of the one off factors I have already talking about.
Speaker 3: reflecting a robust operating performance that enables us to absorb the net impact of the one-off factors I have already talked about.
Speaker 3: Earnings growth also benefited from lower net finance costs, a partial recovery in our associated income, and a slightly lower underlying tax rate.
But nice growth also benefited from lower and that's finding costs a partial recovery in our associate income and there's likely lower underlying tax rates.
Speaker 3: By 2022, we expect net finance costs to be around $1.5 billion.
But 'twenty to 'twenty, two we expect net finance costs to be around $1 5 billion pounds.
And based on current tax rates globally, we expect a similar tax rate of around 25%.
Speaker 3: And based on current tax rates globally, we expect a similar tax rate of around 25%.
Finally, extrapolating current spot rates, we expect currency translation to be broadly neutral on full year adjusted EPS growth.
Speaker 3: Finally, extrapolating current spot rates, we expect currency translation to be broadly neutral on fully adjusted EPS.
Speaker 3: Operating cash conversion was strong at 104%.
Operating cash conversion was strong at 104%.
Speaker 3: reflecting our focus on cash delivery, and also benefiting from the absence of a stock build in Australia following the change in excise structure.
Reflecting our focus on cash delivery.
And also benefiting from the absence of a stock build in Australia. Following the change in excise structure.
Speaker 3: We reduced leverage to just below three times and have a strong balance sheet with a very manageable maturity profile, with 90% of our debt fixed, an average maturity of 10 years and close currency match.
We reduced leverage to just below three times and have a strong balance sheet with a very manageable maturity profile with 90% of our debt fix it and the average maturity of 10 years and close currency matching and.
Speaker 3: and maximal annual death maturity no higher than forbidden.
And maximum annual debt maturities no higher than 4 billion pounds.
We expect gross cut that for gross Capex for 'twenty to 'twenty two to be broadly in line with our adjusted depreciation and amortization that's around 750 million pounds.
Speaker 3: We expect gross capex for 2022 to be broadly in line with adjusted depreciation and amortization at around $750 million.
Speaker 3: Over the next five years, we are on track to generate around 40 billion pounds of free cash flow before David.
Over the next five years, we are on track to generate around 40 billion pounds of free cash flow before dividends.
With strong profitability cash conversion in excess of 90% and leverage within our two to three times net debt to beat the corridor. We now have the flexibility to be more active in our copper location to deliver long term value for shareholders.
Speaker 3: With strong profitability, cash conversion in excess of 90%, and leverage within our two to three times net debt to beat the corridor, we now have the flexibility to be more active in our capital allocation to deliver long-term value.
Speaker 3: This will include continuing to grow the dividend and maintaining leverage within our target corridor of 2 to 3 times adjusted net debt to adjusted EBITDA, whilst also considering potential bolt-on M&A opportunities and share buybacks to enhance shareholder returns.
These will include continue to grow the dividend and maintaining leverage within our target corridor of two to three times adjusted net debt to adjusted Pizza.
Whilst also considering potential bolt on M&A opportunities and share buybacks to enhance shareholder returns.
Speaker 3: The Board will prioritize these capital allocation opportunities while taking into account macro and fiscal factors and potential regulatory and litigation outcomes.
The board will prioritize these capital location opportunities, while taking into account the markman physical factors and potential regulatory and litigation outcomes.
Speaker 3: As a first step, we have announced the dividend increase of 1% and the £2 billion share buyback for 2020.
As a first step we have announced the dividend increase of 1% and that 2 billion pounds share buyback for 'twenty to 'twenty two.
Looking forwards 2022 results I expect to be driven by.
Speaker 3: Looking forward, 2022 results expect to be driven by
Speaker 3: strong category growth and a further reduction in losses.
Strong category growth and a further reduction in losses.
Speaker 3: We expect a continued good underlying performance in combustibles.
We expect a continued good underlying performance in combustibles.
Speaker 3: while lapping a very strong performance in the U.S., absorbing the unwinding of the U.S. trade inventory movement, and reflecting a highly competitive price environment in Australia.
While lapping a very strong performance in the U S. Absorbing the unwinding of the U S trade inventory movements, and reflecting a highly competitive pricing environment in Australia.
As a result, we expect revenue growth of two 3% to 5% and EPS growth, reaching high single figures.
Speaker 3: As a result, we expect revenue growth of 3% to 5% and EPS growth reaching high single figures, with incremental benefits from the share buyback.
With incremental benefit from the share buyback.
And the growth weighted to the second half.
And with that I will now hand, you back to Jack.
Speaker 3: And with that, I will now hand you back to Jack.
Thank you.
Uh huh.
Hmm.
Okay.
So now we're at the time of the Q&A.
Thank you so much.
Speaker 4: Thank you so much, Shaq. And if you would like to ask a question on today's call, please press star 1 on your telephone keypad. You'll then be introduced and you'll ask your question. Again, it is star 1 on your telephone keypad to ask a question.
Try to ask a question on today's call.
One person.
It doesn't.
And you ask your question again at a star one on your kind of funky.
That's your question.
Speaker 4: The first question is coming from the mind of John Linsdorf from Society General. You're now unmuted and may now go ahead.
The first question is coming from the line of John My first one.
In General you know.
Oh go ahead.
Speaker 5: Thank you very much. Good morning, gentlemen. Good morning. On the NGP, I mean, clearly the cost base in 2021 was around $3 billion.
Thank you very much good morning, gentlemen.
Morning.
On the N G. P. I mean, clearly the cost base in 2021 was around 3 billion.
Speaker 5: Given that your expected revenues to be $5 billion by 2025...
Given that Youll expect revenues to be 5 billion by 2025.
Speaker 5: How, I mean, does that imply a significant increase in operating leverage and that the costs for the whole NGP operations are not going to grow significantly between now and
How does that imply a significant increase in operating leverage and that the cost for the whole N. G. P operations. They don't kind of grows significantly between now and.
Speaker 5: 2025. How do you get profitability?
2025, how does that how does that how do you get to profitability.
Well first of all we need to consider that these are very solid.
Speaker 3: First of all, we need to consider that these are very consolidated figures. When you see the broader group numbers, it's a combination of markets where we have been very mature for some time. For example, vapor in the U.S.
Solid data the figures we have a when you see.
The broader group numbers, it's a combination of market, where we have been very mature for some time for example vapor in the U S. We have been investing in that market for a longer so we referred to in the presentation. That's in the second half we just got through a positive clock Khartoum contribution from vapor, which.
Speaker 3: We have been investing in that market for longer. So we refer to in the presentation that in the second half, we just got to a positive category contribution from Vapor, which was a fantastic result from the US team.
It was a fantastic result from the U S team.
Speaker 3: But at the same time, we have other markets where we are just starting the geographic expansion. If you see many markets in Ina, for example, THP has been rolled out very recently through Hyper.
But at the same time, we have other markets, where we are just starting their geographic expansion if youll see many market, Indiana. For example, THB has been rolled out very recently through hyper.
So it is difficult to make a a kind of a you know a consolidated view you'll have to go in in a more isolated case, but the fact is that our leave herself profitability is working properly the trade margins.
Speaker 3: So it's difficult to make a kind of a consolidated view. You have to go in a more isolated case. But the fact is that our levers of profitability.
Speaker 3: is working properly. The trade margins, like I mentioned before, has reduced significantly, mainly on the vapor side. We are taking pricing. Pricing will be an element of us reaching profitability. And we are now being able to, like you said, getting some operational leverage because our fixed cost has been vested and a lot of extra marginal consumers are coming to the platform in many different markets.
I mentioned before has reduced the significantly mainly on the vapor side, we are taking pricing pricing will be an element of us are reaching profitability and we are now being able to like I said getting some operational leverage across our fixed cost has been invested in the a lot of extra.
Imagine how consumers are coming to the plot the fall in many different markets. So we are very confident that with the progress that we have made and are and we will see more of that scene. They used to come in and we are very comfortable to reach the profitability of our by 2025.
Speaker 3: So we are very confident with the progress that we have made, and we will see more of that in the years to come. And we are very comfortable to reach the profitability by 2025.
You have seen that in 'twenty, one we started to reduce the losses with the despite or with an investment of 500 million in your categories or we have the levers that are working well and we're continuing to expand.
Speaker 2: You have seen that in 21 we started to reduce the losses with despite or with an investment of 500 million in new categories. We have the levers that are working well and we're continuing to expand.
Yeah no problem.
Speaker 5: Just to follow up on that, I mean, in the past you've mentioned that automating the supply chain on the...
Just just to follow up on that.
In the past you've mentioned that automating the supply chain on the vaping side, which would represent a considerable saving is there any evidence of that sort of coming through or is that still work in progress.
Speaker 5: vaping site would represent a considerable saving. Is there any evidence of that sort of coming through or is that still a work in progress?
Speaker 3: No, there is clearly evidence. This is clearly coming through. We have been seeing the reduction in the liquid that we produce because we are replacing manual lines with automation as a consequence of us being able to gain scale.
That is clearly evidence this is clearly coming through we have been seeing the reduction in the in the liquid that we produce because we are replacing manual lines without formation as a consequence of us being able to gain scale and and these investments has a very very fast payback to be honest and ER and ER and we are benefiting.
Speaker 3: And these investments has a very, very fast payback, to be honest, and we are benefiting from that. And this is clearly one of the elements. That's why I highlight that in terms of our leverage to improve profitability is automation is clearly one of these elements there.
From that and this is clearly one of the elements. That's why I highlighted that in some of our Levered Shaw tool to improve our profitability is the automation is clearly one of these elements there.
Thank you and then quickly.
Speaker 5: The share repurchase of £2 billion seems to imply that roughly...
The share repurchase of 2 billion seems to imply that roughly.
Speaker 5: looking forward, you're targeting sort of maintaining net debt to EBITDA at about three times, at least on my figures. Should we assume that, although you say two to three times, should we assume that going forward that buybacks are more important?
Looking forward you, you're targeting sort of maintaining net debt to EBIDTA wrote about three times or at least at least on my figures you should we should we assume that although you say two to three times should we assume that going forward.
Buy back some more more important than sort of so its debt reduction and deleveraging from the abstract should we assume that sort of the high end of your target range of two to three times is where you will feel comfortable.
Speaker 5: further debt reduction or de-leveraging from that perspective? Should we assume that the high end of your target range of two to three times is where you're comfortable?
Speaker 2: We have said that we will do the right balance between the different elements that we spoke about in our model, and we'll take the opportunities as we go. We're very happy now to be at 299 in terms of net debt to EBITDA, and we have a corridor of 223, so we have space to navigate in the different parameters of that new approach in terms of capital allocation.
Yeah, we have said that we will do the right balance between the different elements that we spoke about in Nevada, and we will take the opportunities as we go we're very happy now to be at a 299 in terms of net debt to EBITDA and whoever corridor two to three so we have space whenever you get in the different environment, those or that the new Oh.
In terms of capital allocation.
Yeah, and just to complement that we we have proof now that we were able to delever at between three to four times. So not every year on a constant that frac space for sure we cannot control the effects.
Speaker 3: And just to complement that, we have proved now that we were able to deliver between 0.3 to 0.4 times on every year on a constant FX base. For sure, we cannot control FX.
Speaker 3: And just in 2021 alone, our free cash flow was on a constant FX base of $3 billion on top of the dividends that were paid. So we are in a very strong position. That's why we are making the point about $40 billion free cash flow for the next five years.
And Justin 2021 alone our free cash flow was on a on a constant FX basis 3 billion on top of the dividends that were paid so we are in a very strong position. That's why we are we are making the point about 40 billion kept free cash flow for the next five years. So we have a very cash generative company and like.
Speaker 3: So we have a very cash-generative company. And like Jack said, we will be weighting their priorities year by year. And I will not be guiding on the top of the range or the low of the range. We need to keep in the corridor and make the right calls to improve shareholder returns over time.
<unk> said, we will be waiting their priority a year by year and I'm not the guy they are on the top of the range of the low of the range that we need to keep in the corridor and making the right calls are to improve shareholder returns over time.
Speaker 5: Thanks. And lastly, can I just ask a quick question? Yesterday, one of your competitors reported or stated that there had been a trade infringement patent ruling against you in Germany. Does that impact Glow Hyper's launch or expansion or continuing sales in Germany?
Thanks.
Lastly, can I just ask a quick question yesterday, one of your competitors reported that Oh stated that that'd been trading Finjan patent.
Ruling against you in Germany does not impact our Clos.
Hi does launch all expansion continuing sales in Germany.
Speaker 2: No, it does not. But the more broader question is there are a lot of cases, as it is normally in, I would say, an emerging category in the last four to five years, really. There's a lot of patent challenges across the world. You win some, you lose some. They mostly look at backwards looking. And technology is evolving fast. And no, there's no problem in Germany.
No it does not.
But the more broader question is are there are a lot of gay says as it is normal in the I would say on the emerging category in the last four to five years really are there's a lot of patent challenges across the world are you win some you lose some they mostly look at the backwards looking and technology is evolving fast and no.
There's no problem in Germany.
Thank you very much.
Thank you for your question John and the next question is coming from the line of Chare off Shane from March.
Speaker 4: Thank you for your questions, John . And the next question is coming from the line of Gerald Shrain from Barclays. You're now unmuted. Edmund out.
Yeah.
Yeah.
You May now ask your question.
Speaker 6: Good morning, thank you, Jack. Thank you, Tadeo. So I have three questions. One is on the dividend philosophy going forward. So this year you have increased dividend by 1%, and you haven't written the statement that dividend payout will be 65% of EPS. So should we assume that dividend growth, dividend will still grow going forward, but it could be below EPS growth, and so more of...
Good morning. Thank you Jack Thank you Dahlia fab three questions. One is on the dividend philosophy going forward. So this year you have increased dividends by 1% and you haven't written this statement that dividend payout will be 65% of EPS. So should we assume that dividend growth.
Dividend will still grow going forward, but it could be below EPS growth and so more of it.
Speaker 6: free cash flow will be returned to shareholders in the form of share repurchases and clearly we have seen you know that the stock has been very strong in anticipation of share repurchases so clearly markets value share repurchases more than dividends so so how are you thinking about dividend growth going forward over the next few years? Yeah so dividend first dividend will continue to grow. Daniel.
Free cash flow a little bit return to shareholders in the form of Shirley budget.
We have seen that.
The stock has been very strong in anticipation of share repurchases, so clearly markets value share repurchases more than they were doing so.
So how are you thinking about dividend growth going forward over the next few years, yeah. So dividend firstly, if it doesn't really it continues to grow.
Speaker 3: Yeah, look, we have 20 years plus track records of dividend growth.
Yeah look we are we have a 20 years plus track records of dividend growth even during the crisis of coffee to and we were the one of the companies out there keeping the growth in dividends. We believe that these are this is aligned with the majority of the B a T shareholders and we want to keep it there.
Speaker 3: Even during the crisis of COVID and we were one of the companies out there keeping the growth in dividends, we believe that this is aligned with the majority of the BAT shareholders and we want to keep the dividends growing.
That's growing.
Speaker 3: in sterling terms. So at the end of the day, this would be more relevant for us than the 65. As we speak today, the ratio is even above the 65, is slightly above the 66 percent.
Studying to them. So at the end of the day these would be more relevant photos than the 65 as we speak today. There the ratio is even above the 65 or is that is it.
Likely above the 66%, but ER, but moving forward, we will make considerations around the dividend buy back where they clearly are our assumption that the dividend continues to grow not necessarily at that 65% payout like you'll refer a true and and then how we.
Speaker 3: But moving forward, we will make considerations around the dividend, around buyback, with a clear assumption that the dividend continues to grow.
Speaker 3: Not necessarily at that 65% payout like you referred to.
Speaker 3: and then how we can enhance shareholder return as a combination of the dividend, of the buyback, and also the investments that we have to make to accelerate the transformation of the group eventually, if we find it interesting in terms of M&A both.
Kenny Hayes shareholder return as a combination of the dividend over the buyback and also the investments that we have to make to accelerate the transformation of the group. Eventually if we find the interest in you on there in terms of M&A bolt ons and these within the range of two to three that's the octave a capital allocation framework that we.
Speaker 3: and these within the range of two to three. That's the active capital allocation framework that we have highlighted today, which is quite aligned with a company that is transforming fast as BHP.
Have a highlighted today, which is quite aligned with a company that is transforming fast SBA T.
Speaker 2: What's very important to me is that in the last three years, we developed the company and we went from a low position in new categories where boldly we put together and forward.
Sure whether it was very important to me is that in the last three years with live loved the company and we went from a a low position in new categories. We're broadly we put together and for the you know multi category consumer centric approach in terms of new categories and that was a lot of investment for three years are creating the.
Speaker 2: you know, multi-category consumer-centric approach in terms of new categories.
Speaker 2: And that was a lot of investment for three years, creating the capabilities, hiring the people, simplifying the company, making sure that our combustible business revenue
It is hiring the people and simplifying the company, making sure that our combustible business, our revenue and value supports that though we had that people total year in 2021 of the way you showed that the results are I mean, they are extremely extremely strong. We're very proud of that now we have a bit more space and lifts all boats.
Speaker 2: and value supports that. We had that pivotal year in 2021 where you saw that the results are extremely strong. We're very proud of that. Now we have a bit more space and less of a straitjacket where we can make more calls moving forward. And that's more the fact of having more opportunities. That is extremely important to Tadeo and myself. And we will continue to grow the company faster in the transformation. And that's the key. That's the key to our business moving forward.
Great jacket, where we can make more quarters moving forward and that's more of a factor of having more opportunities are that he is extremely important to oh and myself and we will continue to grow the company faster or are in the transformation and that's the key that's the key to our business moving forward.
That's very very helpful. My second question is on the U S market. The U S. Cigarette volumes last year. Then you are saying that's E cigarette volumes grew 20% last year.
Speaker 6: That's very, very helpful. My second question is on the U.S. market. The U.S. cigarette volumes last year, and you are saying that e-cigarette volumes grew 20% last year, and we had a difficult calm. We also had price increases, which were more than historical averages, and still, cigarette volumes have turned out to be only down minus 6%. How are you looking at FY22 volumes? Like, will there be worsening from here because of e-cigarette growth and oil price increases?
Had a difficult comp we also had price increases which were more of them.
I'm glad I didn't understand cigarette volumes have turned out to be only down minus 6%. How are you looking at slide 22 volumes like will there be worsening from here because of E cigarettes and oil price increases are you could have another year of minus 5% kind of volume decline in the U S.
Speaker 6: or you could have another year of minus 5% kind of volume decline in the year.
Speaker 2: I'm not going to give some guidance in terms of the size of the US market, I mean that's much too soon in the year to do this kind of exercise. What I can tell you is that the market was strong last year, we grew value share, the premium segment.
I'm not going to give us some some guidance in terms of the size of the U S market I mean, that's much too soon in the year to do these kind of exercise what I can tell you is that the market was stronger last year. We grew value share of the premium segment was extremely strong there was no unless you've acceleration in terms of.
Speaker 2: was extremely strong. There was no massive acceleration in terms of downtrading.
In terms of down trading.
Speaker 2: I think that the U.S. market is strong. We have a very strong portfolio over there.
I I think that the the U S market is strong we have a very strong portfolio over there and we are adding to the launch of lucky strike there or the AR as a one of the best launches in many years in the U S market and we go for value in the U S market as you know we go for value.
Speaker 2: And we had the launch of Lucky Strike there as a...
Speaker 2: one of the best launchers in many years in the U.S. market.
Speaker 2: And we go for value in the US market, as you know. We go for value, and we'll continue to do that. So you will have to tamper that a bit, related to everything that is happening, the price of oil and other things in the US. But the springboard is very strong.
And we'll continue to do that so you will have to temper that debate, though are related to everything that is happening to the price of oil and the and all the things in the U S. But the springboard is very strong.
Sure.
Speaker 6: Sure, and my last question is, you know, on potential, you know, future launches on Glow. So your competitor is clearly out there and they're talking very bullishly of their device out there. And we haven't seen an update on Hyper now, I would say in almost two years. So when could we expect the next device launch out of?
My last question.
Uh huh.
On potential future launches on blue So your competitors clearly out there.
And very bullishly of their device out there and we haven't seen an update on blue on high but now I would say in almost two years. So when could we expect the mix of device launch out of the blue.
Speaker 2: That's a very good question and a bit too early in the process. But let me tell you the following. Since two years, or since a year and a half, rather, we have launched Glow Hyper in a lot of geographies. The rollout has been extremely successful.
Well, that's a very good question that there'll be two early in the in the past that but let me tell you. The following you know since two years since a year and a half world, though we have launched a global hyper and a lot of geographies. The rollout that's been extremely successful and we have been able to roll positions everywhere. So we have a very good product.
Speaker 2: and we have been able to go positions everywhere, so we have a very good product.
Speaker 2: Now, we've not been sleeping in terms of R&D, to say the least. And we have a lot of things that are getting ready for launch in the foreseeable future. But it's too soon to speak about that. Too soon to speak about that. But we're very happy with the performance that we have at the moment. And we're still doing geoexpansion of the current one. You know, I'm a farmer. You do one, then you bring the second one, then you continue to accelerate.
We've not been slipping in terms of R&D are to say, the least though and we have a lot of things that are you know are getting ready for launching our in the the foreseeable future, but it's too soon to speak about that too soon to speak about that but we're very happy with the performance that we have at the moment and whereas steel.
It's doing geo expansion of their current one you know I'm a farmer you do one then you bring the secular ones then you continues to accelerate.
Speaker 2: We're growing by close to 5 million additional consumers every year, and that is a record on the record of last year, and it means that we have the right portfolio for the consumers. And we have, because we are multi-category, a lot of insights on consumers on the three categories. So we know a lot about consumers that are going to new categories, not only one, but three. That's very helpful.
Where we're growing by you know close to 5 million additional consumers every year.
And that is a record on the record of last year and it means that we have the right portfolio for the consumer and we have because we are a multi category a lot of insights on consumers on the three categories. So we know a lot about consumers that are going to new categories, not only one but three.
That's very helpful. Thanks, a lot.
Thank you.
Thank you. Thank you very much.
Speaker 4: and the next question is coming from the line of Nick Oliver from UPS. You're now unmuted and I'll go ahead.
And the next question is coming from the line of Nik Oliver from UBS you are now.
Let me tell them and I'll come back.
Speaker 5: Hey, good morning, Jack and Sudeo. Two questions from me as well, please.
Good morning, and Jack to do and two questions from me as well, please and firstly just on the EPS guidance and obviously very nice to see a return to the high single digits in constant FX algorithm.
Speaker 5: Firstly, just on the EPS guidance, it would be very nice to see a return to the high single-digit constant FX algorithm.
Speaker 5: But I guess that was the historic BET model and now we've got the buyback as well. So just any words on just why it's not higher? Is that just investments in new categories or maybe some of the unwind of the US trade inventories you mentioned?
And I guess, you know that was the historic and B E. T model and now we've got the buyback as well. So just any words on just you know why why it's in Ohio is that just a investments at <unk>.
In your categories or maybe somebody that would be.
Unwind of the U S trade different trees that you mentioned and second question on the U S. You mentioned, obviously, the very strong pricing in the U S. You know eight price increases in two years that your peer has done done done seven.
Speaker 5: And second question, on the US, you mentioned obviously the very strong pricing in the US, you know, eight price increases in two years, I think your peer has done seven. Any words on how you're thinking about pricing going forward?
And he was on how you're thinking about pricing going forward. Thank.
Speaker 2: Thank you.
Thank you.
Yeah.
Yes.
Speaker 3: On the EPS, we are coming out of two years of mid-single digit at the back of COVID.
On the E. P. S E. We are coming out of two years of mid single digits at the back.
Of covet and and we want to 222 to remind everyone about the the high single digit cigarette that we used to have in the past and are at the end of the day. It's just slightly different the company then that we have in the past for today Ray knows what spot.
Speaker 3: And we want to remind everyone about the high single-digit figure that we used to have in the past.
Speaker 3: And at the end of the day, it's slightly different the company that we have in the past for today. Reynolds was part of our associates, now it's part of our subsidiaries.
All of our associates and our responsible subsidiaries and we believe that the return to high single digits would be a natural step for our company that now has thrown in the into the investment mode. There in new categories and moving now to a path to profitability, which is in that sense.
Speaker 3: And we believe that the return to high single digits would be a natural step for a company that now has turned into the investment mode in new categories and moving now to pass to profitability.
Speaker 3: which in essence will translate into a kind of a profit driver and profit enhancement for us for the years to come, which is very, very positive.
Translate into a kind of a rough to driver and brought to a haseman photos for the years to come which is very very positive and AR, but we have to remind everyone that our numbers include the FX transactional.
Speaker 3: And, uh, but we have to remind everyone that our numbers include, uh, FX transactional, uh, different from others that, uh, give guidance in EPS on, uh.
Different from others, that's our guidance and EPS on a excluding transactional FX, we incorporate this in our numbers and the and with the fact that Reynolds now it's part of the subsidiaries means that the.
Speaker 3: excluding transaction FX, we incorporate these in our numbers.
Speaker 3: And with the fact that Reynolds now is part of the subsidiaries means that the EPS mostly needs to come from our operational performance from the group. And in 2022, in particular,
The EPS, mostly nishu comfort on our operational performance from from the group and in 2022 in particular.
Speaker 3: We made reference to some of the headwinds that we faced during my presentation. And that's the reason why we were referring to us being able to start reaching the high single digits in 2022. That will be boosted by the share buyback in accordance with how we can execute throughout the year. So step-by-step. Thank you.
We made reference to some of the some of the headwinds that we faced during my presentation and that's the reason why we were referring to what was being able to start reaching the high single digits in 2022 that will be boosted by the share buyback in accordance with how we can execute through all the steps.
By step.
And they use price I don't think that we can make any yeah U S price, we're not going to make any comments related to that the price elasticity is still strong in the U S. There's a lot of moving parts at the moment in terms of price of gas employment in the inflation and everything I mean, who will take it step by step.
Speaker 2: comments related to that. Price elasticity is still strong in the US. There's a lot of moving parts at the moment in terms of price of gas, employment, and inflation and everything. I mean, we'll take it step by step. We have a very, very robust portfolio. We have grown premium share. We have launched brands in different parts of the portfolio. And we have a very strong position. So I think that there is a good momentum. We'll have to see how it develops during the year. Great. Thank you so much.
It was very very robust portfolio, we have grown premium Michelle we have launched runs are in different parts of the portfolio and we have a very strong position. So I think that there's a that there's a good momentum we'll have to see how it develops during the year.
Great. Thanks, so much and maybe just one quick follow on on the U S. Animals. You mentioned you know Lucky strike has that taken once the centre shale I mean, when you think about sort of segmentation in the U S is it really.
Speaker 5: Great, thanks so much. And maybe just one quick follow up on the US. You mentioned, you know, Lucky Strike, how that's taken 1% a share. I mean, when you think about sort of segmentation in the US, is it really premium growing strongly and value, and then maybe the midsection is struggling? Is that how we should think about volumes in the US?
Premium growing strongly and value and then maybe the mid section of it is struggling is that how we should think about volumes in the U S.
Speaker 2: What you have at the moment in the U.S. is a strong premium market, and we're doing very well in that strong premium market. You have a high level of pricing, but it's 50 different states with 50 different levels of pricing in the different states. So that's an aggregated number, which is less...
What do you have at the moment in the U S. It is a strong premium market and we're doing very well in that the strong premium market, though you have a high level of pricing, but it's 50 different states with 50 different levels of pricing in the different states. So that's a negative number which is a less less.
Speaker 2: representation of one given market somewhere. But it gives you the possibility to do a lot of pricing, because you can do geopricing much more effectively in the US. And the other thing is that you see that in the lower part of the market, you have some competitive brands are doing well. Lucky Strike has taken a very good position. And the non-big three players are taking some pricing. So I think that it's a geoexpansion approach plus.
Representation of one given market somewhere but it gives you the possibility to do a lot of pricing because you can do a dual pricing much more effectively in the U S and the other thing is that you see that in the lower part of the of the market though.
Some competitive brands are doing well Lucky strike has taken a very good position and are the are the non big three players are thinking some oh, taking some pricing. So I think that Heathrow jewelry expansion approach plus the effect of having the right portfolio that makes that makes the difference.
Speaker 2: The fact of having the right portfolio, that makes the difference.
Speaker 5: Cool. Perfect. Thanks, guys. Really clear as always. Thank you. Thank you very much. Thank you for your question, and as another reminder, it is still one on your telephone keypad to make a question on today's call. The next question in the queue is coming from the line of Owen Bennett from Jefferies. Owen, you're now unmuted. I'm an hour. Go ahead. Morning, gents. Hope all is well.
Cool perfect. Thanks, guys.
There was always I think thank you. Thank you very much. Thank you for your question and as soon as a reminder, it is star one on your telephone keypad to make a question on today's call. The next question in the queue is coming from the line of Oh My goodness.
From Jefferies linear now on each of them and I'll ask go ahead.
Good morning Gents.
Good morning, guys I just had a quick question on EM.
Speaker 5: glow in the U.S. so Icos obviously...
Globally in the U S. So I call. So obviously.
Speaker 5: delayed from being back on the U.S. market for a while, at least now, so I'm just kind of the view that it would not be better for you to get your PMTA in on Glow sooner rather than later, so maybe you can be on the market not long after ICOS is potentially being introduced. So I just wanted to get the latest with the Glow PMTA in the U.S., are you maybe even waiting to...
And being back on the U S market for a while at least now and so I'm just kind of would be but it would not be back with you to get your T. M C.
So sooner rather than later, so maybe you can be on the market not long after the Iqos system C. D. G. So just want to say that the latest with the build out the MTA and you asking all you may be waiting.
Speaker 5: to do a PMT on Hyper versus the original, but I was at the Stratford.
He can't deal with the MTA on hyper versus the original glad we found there Scott.
Yeah as you know I'm in the PMT airports that she has a very long process. So we're taking all the steps that we need to take related to that are in order to be a to be in the market. The way, we will need to be in the market you have to always remember there's a lot of offers to the consumer was already in the U S market, though and are the result.
Speaker 2: Yeah, as you know, I mean, the PMTA process is a very long process. So we're taking all the steps that we need to take related to that.
Speaker 2: In order to be to be in the market where we will need to be in the market Yet always remember there's a lot of offers to the consumers already in the US market and the results
Oh E cigarettes, and there is also a traditional or in the results of modern or gives a lot of opportunities for the consumers to a to use a non combustible products in the U S. So it will take a long time before says with the PMT is very long.
Speaker 2: of e-cigarettes and the results of traditional oil and the results of modern oil gives a lot of opportunities for the consumers to use non-combustible products in the U.S.
So we'll play the long game and there's no problem related to that is first we are focused on E cigarettes, because that was the cause of the a product to the needs of the consumers. We've done that well remember three years ago. A lot of people said, we would never have a place in there now are leading their worldwide and are very close to.
Be there in the U S. We're taking pricing, we're taking position and in terms of order with a traditional debt is around 10% of the market in the U S. Well have a very strong position also modern oral is a very small category at 1% with a lot of Ah study always said the price can be sure that needs better products in the future.
Speaker 2: And in terms of oil, with traditional oil that is around 10% of the market in the U.S., we have a very strong position also. Modern oil is, you know, a very small category at 1%, with a lot of, as Thaddeus said, price key emissions. That needs better products in the future, and that will need PMTAs again. That's pushing it down the road a few years before it's absolutely there. So step by step, and yes, we are pursuing that very closely. Okay, just a quick follow-up there. So on the vape side, so you moved to profitability in the second half. If we do see PMTAs in the near term, could we expect spend behind the vape category from you guys to really materially pick up again, or would you expect kind of spend levels where they are to just persist? I think that what we have at the moment is a very, very efficient.
And that will need PMT is again, so that's pushing it down the road a few years before it's a it's absolutely there so step by step and yeah. So we're pursuing that very closely.
Okay.
Speaker 5: Just a quick follow-up there, so on the VAPE side, so you moved to profitability in the second half. If we do see PMTAs in the near term, could we expect spend behind the VAPE category from you guys to really materially pick up again, or would you expect kind of spend levels where they are to just sit still?
So it won't be on the vape side, So you move to profitability in the second half.
If we do see P. M. P. Eight in EMEA can cause we expect spend behind of eight Coffey from you guys there to be any materially pick up again.
Or would you expect kind of spend levels, where they are you just to chase.
Speaker 2: I think that what we have at the moment is a very, very...
I think that's what what we have at the moment is a very.
Uh huh.
Very efficient approach in terms of investment and in terms of marketing in the U S. For E. Cigarettes are there there would be no need for further acceleration what we have at the moment is a is an overall ecosystem days working very well and working in our favor we're the only ones who have what 2005.
Speaker 2: approach in terms of investment and in terms of marketing in the U.S. for e-cigarettes. So there would be no need for further acceleration.
Speaker 2: 700, 500 reps in the US that are supporting vapor. And that gives us a very strong position. We still have to do some geoexpansion. As you know, we are very close to be the leader at 0.1. But yet, we're the leaders in only 26 states. So I still have a lot of states to go and to do geoexpansion. So I'm very much confident in the fact that we'll continue to grow in the US in the vapor business. And we start to make money. Cool. Thanks, guys. Very helpful. Thank you. Thank you for your question. And the next question is coming from the line of Russia.
And with the reps in the U S. But also bolting, a vapor and that gives us a very strong position, we still have to do some geo expansion. As you know we are very close to be the leader I 0.1, but yet we're the leader is even though only 26 states. So I still have a lot of states the war and ER to do Geo expansion.
So I'm a very much a confidence in the fact that we will continue to grow in our in the U S. In the paper business and we start to make money.
Speaker 5: Thanks, guys. Very helpful.
Cool thanks, guys very helpful.
Cool.
Speaker 4: Thank you for your question and the next question is coming from the line of Rashad Cohen from Morgan Stanley . Rashad, you are now unmuted and may now go ahead. Good morning. Hi, good morning gentlemen.
Thank you for your question on the next question is coming from the line of Shar to come on from Morgan Stanley .
Now let me now go ahead. Good morning, Hi, Good morning, gentlemen, Thank you for taking my questions. Just a couple for me. So the first one if I can follow up on the U S cigarette market are.
Speaker 7: taking my questions. Just a couple for me. So the first one, if I can follow up on the U.S. cigarette market, are you seeing signs of accelerated downtrading in 2022 as inflation and rising kind of gas prices remain elevated? I'm just trying to get a sense on whether you're seeing or expect to see any major changes to consumption trends.
Are you seeing signs of accelerated down trading in 'twenty two.
And in rising gas prices remain elevated I'm, just trying to get a sense on whether you are seeing or expect to see any major changes to consumption trends. This year and then my second question is around fellow in the U S. Just how how are you thinking about that kind of on the medium term I guess, if you take a step back have your views on the U S. Modern oral market changed and.
Speaker 7: And then my second question is around Velo in the U.S. How are you thinking about that kind of on the medium term? I guess if you take a step back, have your views on the U.S. modern oral market changed? And do you expect kind of some level of normalization to promotional activities in 22?
Do you expect kind of some level of normalization to promotional activities in 'twenty two.
So in terms of the in terms of the U S. So again, it's more related to you know what happens in the in 2022 but the I mean, the market has been very strong in the U S. In 'twenty, a 2021 and you have a something that I was up in the towards the the last part of the year like Q4 is a reduction in discounting because you'll have.
Speaker 2: So in terms of the U.S., again, it's more related to, you know, what happens in 2022. But I mean, the market has been very strong in the U.S. in 2021. And you have something that has happened towards the last part of the year, in Q4, is a reduction in discounting, because you have the absolute pricing and then you have the discounting that gives.
Absolute pricing and then you have the discounting that gives us a good that gives them more space to the consumer and these discounting has been lower than what they are normally the spread of the yeah. So that's why you see a bit of inflection that reflects into a bit of a pick up at the low end of the market and what's very important.
Speaker 2: that gives more space to the consumer. And this discounting has been lower than what they are normally at this period of the year. That's why you see a bit of inflection that reflects into a bit of a pickup at the low end of the market. What's very important as an indicator is the strength of the premium and the strength of the premium is there.
And as an indicator is the strength of the premium and the strength of the premium is down.
Speaker 2: So I would not be too concerned with that. The second question is related to modern oil. Yeah, modern oil, you know.
So I would not be a I would not be too concerned with that the second question is related to a modern or London or you know.
Speaker 2: You have already, as I say always, there's a lot of offers in the market already in terms of reduced risk products, especially with e-cigarettes and traditional oil. Modern oil is only 1% of the market.
I've already as I say always there there's a lot of offers in the market are already in terms of reduced risk products, especially with the E cigarettes in the traditional or modern oil is only 1% of the market.
Speaker 2: As we said last year, it's mostly a geo-expansion in the course of 2021, so it starts to stall a little bit. And then what you have is big companies that are investing heavily in discounting and offers of products to the consumer. Buy one, get one free, kind of, you know. So that's quite extreme at the moment. The second thing that we know, so the value is not there.
As we said last year, it's most Leo Geo expansion in the course of 2021. So it starts to stall a little bit and then what you have is a big companies that are investing heavily in discounting.
Oh first of our products to the consumer a buy one get one free kind of you know so that's quite a that's quite the extreme at the moment. The second thing that we know so the value is not there.
Speaker 2: The second thing that we know is that it's very much occasional usage because the satisfaction of the product, remember they have to be in the market since a long time, the satisfaction of these products are very low.
Second thing that we know is that the is very much a occasional usage because the satisfaction of the product you remember they have to be in the market in a long since a long time, yeah. The satisfaction of these products are very low.
Speaker 2: And you have to do PMTA, so it takes a few years more so that you have product satisfaction to the right level. So that very occasional usage of these products costs you a bomb in terms of consumer conversion. A bomb.
And you have to do P. M. Tas. So it takes a few years more so that you are a product satisfaction to the right level. So that's very occasion or usage of these products of course, you're born in terms of consumer conversion Obama and their products are not yet there to the right level for the consumers. So that that category will take some time before PMT has come in.
Speaker 2: And the products are not yet there to the right level for the consumers. So that category will take some time before PMTAs come in and bring additional new products. As you see in the rest of the world where the leaders, why? Because the products are much better.
And bring additional new products as you've seen the rest of the world where the leader was why because the products are much better.
Speaker 2: They are much more adequate to the consumer needs. So I think that that category is really under tension in terms of pricing and margins at the moment. A lot of price skirmishes gaining, you know, it's the Far West a little bit out there. And that will take two years, three years, in order to get the PMTAs on the road.
They are much more are they quite to the consumer needs. So I think that the categories are really on the tension in terms of our pricing and margins at the moment a lot of price kill me. She was gaining a you know it's the it's the the far west a little bit lower there and that will take two years three years in order to get there.
The MTA is a on the road.
Small thank you very much.
Thank you for your question.
Speaker 4: Thank you for your question. And the last question is coming from Richard Felton, Goldman Sachs. Richard, you're now unmuted. I'm going to now go ahead. Morning. Thanks. Good morning, guys. My first question is on another one on US pricing.
Next question is coming from Richard Felton Goldman Sachs Michele.
You May now go ahead.
Thanks. Good morning, guys. My first question is on another one U S pricing them.
Speaker 8: I know you're not going to give us detail of your FY22 pricing plans, but clearly the frequency and the size of your price increases in the U.S. has stepped up quite materially over the last few years. So I guess, can you help us understand what the strategy has been? Is that being kind of opportunistic as the consumer has had a bit more disposable income or is that a strategic shift in the way that you've been approaching pricing?
I know, you're not going to give us detail of your FY 'twenty key pricing plans, but clearly that the frequency and the size of your price increases in the U S has stepped up quite materially over the last few years. So I guess can you help us understand what the strategy has been is that being kind of.
Opportunistic as you can see and that's had a bit more disposable income or is that a strategic shift in the way that you've been approaching pricing in the USA for the last few years. So that's a shift it's not opportunistic strategic shifts.
Speaker 2: Strategic shift is not opportunistic, strategic shift. We understood much better and sooner the price elasticity and the fact that the U.S. is 50 states. And the tools and the approach was much more national than it was regional or even state-by-state or communities-by-communities or city-by-city.
We understood much better and sooner the there the price elasticity in the fact that the U S is 50 states and the tools and the and the approach was much more national day, It was regional or even state by state or communities by communities or city by city.
Speaker 2: So that gave us a lot of opportunity to do pricing. And as we can monitor that very well, then we took more pricing. And remember, there are two levels of pricing in the U.S. One is the public price list.
That gave us a lot of opportunity to do pricing and as we can monitor that very well then we took more pricing and remember there are two levels of pricing in the U S. One is the public price list are the published price list and the second one is the discounting and there is more than 4 billion in in discounting in the U S for the consumer.
Speaker 2: the published price list, and the second one is the discounting.
Speaker 2: And there is more than $4 billion in discounting in the U.S. to the consumer.
Speaker 2: Forget the trade, to the consumer. So you can modulate and adapt as you go along. And you can make sure that your rhythm is maintained. So strong pricing in the last two years in the US. The environment, we have to see exactly how it works, as I said earlier. And then we'll modulate our pricing related to that. But I think that there's still some space for pricing in the US, for sure. Just add to what Jack said.
Forget the trade to the consumer so you can modulate and adapt as you go along and you can you can make sure that the that Youre rhythm is maintained so strong pricing in the last two years in the U S. A the environment, though we have to see exactly how it works as I said earlier, and then we'll modulate our pricing related to that.
I think that Theres still some space for pricing in the U S for sure just add the towards what Jack St.
Speaker 3: It's important to highlight the data analytics that we have put in place in the U.S. over the last two years. The revenue growth management that gives us visibility that we didn't have in the past, even by postcode or channel, and we can make a very target movement in terms of pricing and overall trading.
What you highlight the data analytics that we have put in place in the west over the last two years the revenue growth management that keeps us visibility that we didn't have in the past even by both cold or channel and and we can make a very target movements in terms of our pricing and overall.
Trading in particular, and this combined with a very strong portfolio and very well represented not just in the premium but all during the mid and the low we gave us the confidence to take the actions that we have taken the last few years and by the way on the same token are because we have size and scale in a very strong brand in E cigarettes, we can do.
Speaker 3: particular, and this combined with a very strong portfolio and very well represented not just in the premium but also in the middle and the low, we give us all the confidence to take the actions that we have taken the last two years.
Speaker 2: And by the way, on the same token, because we have size and scale and a very strong brand in e-cigarette, we can do exactly the same now, use the tools that we have in commercial and put them on e-cigarettes, because we can exactly do the same approach. That's why we have started in the second half of 2021 to take much more pricing, adapt our offers and go more granular in terms of e-cigarettes. We're all about value.
Exactly the same now use the tools that we have in almost a month and put them on E cigarettes, because we can weekend the exactly to the same are the same reports that's why well we have started in the second half of 2021 to take a much more pricing adapt our offers and go a more granular in terms of the E cigarettes, we're all about value.
Okay.
Speaker 8: That's very clear. My follow up if that's okay. You seem very confident on the free cash flow generation of 40 billion over the next five years. So in that context, why have you decided to do a one year share buyback target rather than committing to a multi-year program? And is there any reason that we shouldn't expect that buyback program to continue in future years?
My follow up if that's okay.
We are confident on the free cash flow generation of 40 billion over the next five years.
In that context, and why have you decided to do a one year share buyback target rather than committing to a multi year program and is there any reason.
We shouldn't expect that buyback program to continue in future years.
You know I mean, I'm, a I'm a I'm a reasonable person and a three years I've always thought there than we had a very little growth in new categories. It was a nascent category with a lot of investments to do then we were starting to accelerate and then you have COVID-19 that goes in there and then we are continued to grow the DVD.
Speaker 2: You know, I mean, I'm a reasonable person. And three years ago, we started, and we had very little growth in new categories. It was a nascent category with a lot of investments.
Speaker 2: then we were starting to accelerate and then you have COVID that goes in there.
Speaker 2: And then we continued to grow the dividend, and we said we're going to do an enormous effort in terms of cash, and that's what we did in the last three years. We did a cash conversion of more than 100 percent. And then we said we're going to save $1 billion, and we did $1.5 billion, and now we save more than $1.5 billion.
And then we said we're going to do an enormous effort in terms of cash and that's what we did in the last three years with either a cash conversion of more than 100 per cent and then we said we're going to say 1 billion. Then we did $1 5 billion and I always say more than one 5 billion. Now we are starting to go to we went from a from a mid scene.
Speaker 2: Now we're starting to go to, we went from mid-single to crawling nicely our way towards high single digit. Give us a little bit of space, we do two billion in terms of pounds.
Going into crawling nicely, our way towards our towards a high single digit, though give us a little bit of space. We do 2 billion in terms of pounds, which is not far from 3 billion are in terms of our U S dollars of of deleveraging one yeah. So we're telling you that in a short period of time, we're going to do all this.
Speaker 2: which is not far from $3 billion in terms of U.S. dollars of the leverage in one year. So we're telling you that in a short period of time we're going to do all this. And we've put a mechanic in reviewing that on an ongoing basis. So give us a little bit of space, give us a little bit of possibility to grow the business. I will come back to you at the appropriate timing.
And we've put them make anything reviewing that all are on an ongoing basis. So it gave us a little bit of space give us a little bit of a possibility to grow the business that will come back to you at the appropriate timing.
Yeah.
Excellent. Thank you very much.
Speaker 2: Thank you very much. I think that the questions are finished.
Thank you very much I think that the questions are finished them.
Speaker 2: So I am now going back to the end of the presentation.
So I am now going back to the ER to the AR at the end of the presentation. So.
Speaker 9: We are very proud to have delivered the Pivotelier. That was a very important moment for the company. We accelerated our transformation, delivering over 50% new category revenue growth.
We are very proud to have delivered the people it'll yeah that was a very important moment for the company, we accelerated our transformation delivering over 50% new category revenue growth.
Speaker 2: The losses have reduced for the first time, and we have invested $500 million. The losses have reduced for the first time, and we will continue to do so.
The law says that reduced for the first time and we have invested 500 million the losses that we use for the first time ever we've continued to do so we have driven net debt to EBITDA below three times.
Speaker 2: We have driven net debt to EBITDA below three times and our capital allocation flexibility has increased as we just saw.
Our capital allocation flexibility has increased as we just said which is reflected in our share buyback announcement of today, while we're on track to meet our key ESG targets as we enter the next phase of our journey that next phase is a faster transformation and these phases.
Speaker 2: is reflected in our share buyback announcement of today. We are well on track to meet our key ESG targets.
Speaker 2: as we enter the next phase of our journey. That next phase is faster transformation. And this phase will be led by continued strong new category growth and improving profitability.
Will be led by continued strong new category growth and improving profitability.
Together with further development.
Speaker 2: together with further development of opportunities in Beyond Nicotine. This will not only transform our business and the nature of our relationship with society, but will also generate strong financial results, with medium-term outlook of revenue growth of 3 to 5 percent, high single-figure EPS growth, and continued strong cash flow.
The opportunities in beyond nicotine.
This will not only transform our business and the nature of our relationship with society.
It will also generate strong financial results with medium term outlook of revenue growth of 325% high single figure EPS growth and continued strong cash flow.
So we are transforming B E.
Speaker 2: to a high-growth, multi-category, consumer-led CPU.
The high growth multi category consumer lender CPG with a reduced impact on public health and ESG at each school.
Speaker 2: with a reduced impact on public health and ESG at its core.
Speaker 2: I am confident this will create value for all our stakeholders. Thank you very much for joining us today.
I am confident this will create value for all our stakeholders. Thank you very much for joining us today.
Thank you everyone for joining us on today's call you may now disconnect.
Speaker 4: Thank you everyone for joining us on
Please stay connected.